Toyota (TM) Prius Success, Another Detroit Failure

Toyota (TM) has booked 180,000 domestic orders for its Prius hybrid model in the first month that it has been on the market.  There is no reason to think that the car will not do extremely well in America. It is considered to be the best hybrid made by any car company and has sold well in the US since it was first introduced.

With the third-generation Prius on its way to America, many of the auto plants of The Big Three are idle and the domestic manufacturers are hardly in a position to produce tens of thousand of hybrids during the rest of 2009. Even if they could, their products don’t have the reputation of the Prius.

The trouble that GM and Chryler will have fielding competitive products says a great deal about the problems with the government bailout. Even though the bankruptcies are moving quickly, the process of cutting billions of dollars of costs, closing plants, and shuttering dealerships will hurt the domestic industry as the economy begins what appears will be a slow recovery. GM and Chrysler might have been better prepared for the 2010 model year if the government had used its axe a little more slowly and kept a few more people on the job and idled fewer plants.

The push to make Detroit profitable overnight won’t work and it may well backfire. There is nothing wrong with losing money for a year or two if it is done based on strategic decisions to gain market share. The way that GM and Chrysler are now structured they will offer fewer brands and won’t have the kind of product development budgets which will allow them to put out large numbers of truly competitive, next-generation cars.

Detroit has cut to the bone just as some of Japan’s best products, with the Prius out in front, are about to attack the American market.

Douglas A. McIntyre